Bankrupted in 2009, former Invercargill tax accountant Darryl Robert Hewitson was under the mistaken belief that his bankruptcy was over when in 2014 his father gifted him $250,000. The money was not his, it was after-acquired property available to pay his creditors who had received only twenty five cents in the dollar, the High Court ruled.
Bankrupts are automatically discharged from bankruptcy after three years, but this is calculated not from the date of the bankruptcy order but from the date a full statement of financial affairs is provided to Insolvency Service. The High Court was told Mr Hewitson received multiple letters and phone messages from Insolvency Service asking him to send in a statement of affairs and warning him that delays would extend his period of bankruptcy. It has no record of him responding, though Mr Hewitson claims to have provided details in 2014. He has no copy of the document sent.
In the early stages of Mr Hewitson’s bankruptcy, Insolvency Service was looking to sell his Regent Street home in Invercargill. He was bailed out by his mother who paid $180,000 to Insolvency Service, taking ownership of Regent Street and allowing her son to remain in occupation. Four years later, she sold Regent Street back to her son for $165,000. Funding came in part from a windfall $250,000 gifted to Mr Hewitson by his father following sale of the father’s poultry farm.
Learning that Mr Hewitson as an undischarged bankrupt had regained ownership of Regent Street, Insolvency Service lodged a caveat against the title looking to force a sale. In the High Court, Justice Dunningham ruled Insolvency Service was justified in laying claim to Regent Street. It has a statutory duty to collect in assets in order to pay creditors. The fact Mr Hewitson misunderstood the circumstances in which bankruptcies end was not grounds to stop Insolvency Service claiming Regent Street as an asset acquired after bankruptcy and before discharge.
The court was told Mr Hewitson did send a completed statement of affairs to Insolvency Service in April 2018 and was automatically discharged from bankruptcy three years later in 2021. His 2009 bankruptcy followed client losses after he failed to file their tax returns. Failure to file on time meant clients were forced to pay substantial tax penalties.
Hewitson v. Offical Assignee – High Court (31.01.22)
22.032